Question ID: 2284
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Solvency Capital Requirement (SCR)
Article: 192(2)
Status: Final
Date of submission: 28 Apr 2021
Question
If you are unable to determine from your reinsurer whether they have more than 60% of their assets tied up in collateral, are you required to use prudence and assume they have, resulting in the lower recovery rate and higher SCR, or can you still assume the 50% recovery rate as this is best practice (as stated in the counterparty SCR calibration document)
Background of the question
We've had insurers query what approach they should use when they cant obtain this information from their reinsurer.
EIOPA answer
The formula in Article 192(2) first subparagraph of the Commission Delegated Regulation (EU) 2015/35 can only be used if the conditions in the second subparagraph are not met.
If it cannot be established whether or not the conditions in the second subparagraph are met, the formula in Article 192(2) first subparagraph cannot be used.
Where Article 88 of the Commission Delegated Regulation (EU) 2015/35 is complied with, insurance or reinsurance undertakings may calculate the loss-given-default on a reinsurance arrangement according to the formula in Article 112a of the of the Commission Delegated Regulation (EU) 2015/35.